Analysts split over a tie-up between Reckitt and Colgate
Shares in Reckitt Benckiser were in the spotlight yesterday, with three times the usual daily volume traded, as speculation mounted about a potential multi-million tie-up.
Analysts were split as to whether the Cillit Bang maker was eying and merger with Colgate Palmolive, or a potential takeover of Durex maker SSL International. But there was a general agreement that the firm is in prime position to join in the increasing consolidation activity in the household goods sector.
Evolution Securities analyst Chas Manso de Zuniga was dubious over the potential for a deal with Colgate, noting that the speculation is not new and that valuation could be a stumbling block.
“Colgate and Reckitt have similar market capitalisations – £26bn and £22bn respectively – so a combination is likely to be a merger of equals. And it’s never a merger of equals! Who would have the upper hand?” he said.
Evolution preferred the idea of Reckitt making a bid for smaller firm SSL.
“To us this makes a lot of sense as Reckitt could almost double SSL’s profits and rip out say £300m of working capital, compared to SSL’s market cap of £1.4bn,” added Manso de Zuniga.
Charles Stanley analyst Tom Gidley-Kitchin said he thought a link up between Reckitt and Colgate is “highly unlikely”, saying the rationale for working together “is not obvious”.
Reckitt Benckiser shares close up by 1.13 per cent at 3,140p, having gained four per cent earlier in the day.